The future won't just happen - Straight from the Hip by J Mulraj
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Investing in India - Straight from the Hip by J Mulraj
The future won't just happen A  A  A

PRINTER FRIENDLY | ARCHIVES
15 DECEMBER 2012

Michael Lewis has written a book 'The Future Just Happened' which wonderfully explained how technology and the internet changed a lot of businesses whose owners thought they were fairly safe.

For a country the future will not just happen. It has to be planned. Sadly our political leaders are busy making money and making deals for them to think about planning for the future. Such planning is left to a few committed bureaucrats, some NGOs, some in industry and a few concerned citizens.

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This column gives a few links to some wonderful talks, called Ted talks, which appear on a site www.ted.com. I would encourage readers to click on the links and to hear the talks for they are wonderfully informative. At least globally there are people thinking about, debating, and planning for the future.

One talk is by T Boone Pickens, the octogenarian oilman, who pitches for natural gas as the future of US energy. The demand for oil will double till 2040 and 70% of the oil is used as transportation fuel. Pickens calculates that if the 8 million heavy duty trucks in the US can be converted to natural gas, it would save 3 million barrels of oil imports a year, which is 60% of the oil imports from OPEC. The US has enough reserves of natural gas, estimated at more than 3 times Saudi reserves of crude oil.

Another fascinating talk is by Amory Lovins, of the Rocky Mountain Institute, called 'Winning the Oil Endgame'. Lovins has been rightly maintaining that the automobile design is seriously flawed from an energy use standpoint, as it results in only 1% of the energy in crude oil actually moving the passenger. Most of it goes in moving the vehicle, in proportion to their relative weights. Why not use lighter material to reduce the weight of the car, he asks?

We already have lighter, fibre composite materials which can be used to replace heavier steel, which would save fuel. These materials are also capable of withstanding crashes and have enough impact strength to do so. Half the oil can be saved thus, by using automobiles more efficiently, and another half by using biofuels.

The investment needed would be $ 180b., according to Lovins, half in retooling existing manufacturers and half in building biofuels, and the savings would be $ 150 b. a year. The entire book 'Winning the Oil Endgame' can be downloaded from www.oilendgame.com.

In order to encourage the shift from existing cars to more fuel efficient lighteweight fibre composite cars, which would be costlier, Lovins suggests the Government chip in with a 'feebate'. A feebate is one that collects a fee from inefficient vehicles (clunkers), which is then passed on as a rebate to buyers of more efficient ones in a revenue-neutral manner. Another superb talk by Lovins is on 'Reinventing Fire'.

In India we can easily introduce feebates. We haven't. We haven't even mandated fuel efficiency norms, which are prevailing in the US since the first fuel oil shock. There may be work going on towards developing lightweight composite materials, but one has not seen or read about them. There does not seem to be any Government-industry interaction on planning for the future of the auto industry and on the energy needs of the country in future.

As stated earlier, thinking about the future is left to a few. One of them is environmentalist Anupam Mishra who talked about 'The Ancient Ingenuity of Water Harvesting'. Readers are encouraged to hear this talk.

In the deserts of Rajasthan, which gets only 9 inches of rain a year, systems to harvest water have been built 400 years ago. Because of these systems, they are often able, in areas which have just 6 cms. of rain annually, to harvest enough water to be able to offer it to others!

In the city of Jaipur a water tank has been built 400 years ago which harvests 6 m. gallons/year of water. The different water harvesting tanks built indigenously hundreds of years ago work far better than Government sponsored canals to bring water from upto 400 kms. away, which are now often covered by water hyacinths, and often don't deliver potable water.

Why does the Government not call in such dedicated and knowledgeable persons? The answer is clear; because then the politicians cannot make money out of it!

Damian Miller, in his Ted talk, says that after desalination, the salt water residue which is thrown back into the sea (which actually harms it) contains valuable minerals, like magnesium, which can be extracted . In tiny Singapore extraction of just magnesium would result in a $ 4.5b. industry. Imagine what India could do, given its coastline.

But India has a system of multi party parliamentary democracy. This system does have its plus points, in that it gives opportunities to different sections of what is a very divided society, to express the views of that section. It would be wonderful if the different views can be heard, and accommodated, in a manner that keeps the needs of the nation foremost. Sadly, they are heard, and accommodated, in a manner that keeps the needs of the majority party foremost. The needs of the nation be damned.

Thus everything boils down to sitting across a table and bargaining.

For its support on the FDI in retail, both BSP and the Samajwadi Party got some payoffs. The focus in the coming week is now on economic reforms such as the Banking Reforms Bill, for which the BSP is demanding, as a quid pro quo, the clearance on its bill for reservation quotas for minorities in promotion, something that the Samajwadi Party is opposing.

India's story is hugely based on the premise of its young population and the demand forces that this young population would generate once it is educated and has jobs. But would the meritorious young population be energised if their careers are hampered by reservations in promotion?

A few years ago opinions were sharply divided on whether our energy future was dependent on the use of nuclear fuel. This Ted talk defines, very articulately, the advantages and disadvantages of nuclear versus renewable energy .

The proponent, in this debate, of nuclear energy, Steward Brand, an environmentalist, argues that the foortprint of a wind farm is very large, and that renewable energy sources do not provide the 'base power' which is the constant, clean and scalable energy that is needed and which can only come from fossil fuel, hydro or nuclear.

His opponent, Professor Mark Jacobson, says that the actual footprint of wind is very small, just the pole that enters the ground, although the 'spacing' is large. The spaces in between poles can be used for other things like agriculture. As regards the base load, he feels a combination of renewable, together with some conventional, using smart grids, are enough, and that we do not need nuclear, given the risk of weaponisation this entails. And also of how to deal with nuclear waste.

Bill Gates, in his Ted talk, provides an answer to the question of storing nuclear waste - it can be used as fuel to produce more power!

Do we see such informed debates by our Parliamentarians, charged with planning our future? No. Instead we see them, as in West Bengal last week, fist fighting with each other and pulling the hair of women MLAs in a manner reminiscent of the stone age.

The immediate attention getter for the Government is how to contain the fiscal deficit, which, if uncontained, would lead to a downgrade by rating agencies (which is threatened) to junk status. That, in turn, would mean that India gets disqualified as an investment destination by many funds who are mandated not to invest in junk status instruments.

The Finance Minister is hoping for two injections of funds, one from disinvestment of public sector companies and the other from sale of telecom spectrum.

The National Mineral Development Corporation (NMDC) issue was satisfactorily completed through online auction and the Government is now banking on issues of National Thermal Power Corporation (NTPC) and Oil India, in January, to provide a decent show on its disinvestment programme . It would, until then, make policies which are considered investor friendly. If allowed to, by other political parties who have their own games to play.

Regarding auctioning of telecom spectrum, the first auction failed spectacularly because of a ludicrously high reserve price. The reserve price has now been reduced by 30%. One doesn't know if that is enough to attract bidders.

Meanwhile, one of the companies, Russian Sistema, is threatening that unless things are sorted out (its licences were cancelled, alongwith others, by the Supreme Court order) not only will Russia's relations with India be hampered, but it would go for international arbitration to sue for billions of $s. Were that to happen, all fiscal calculations would fly out of the window.

In corporate news of interest, the Sahara group, which has been in the news for needing to pay back a whopping Rs 25,000 crores to some 3 crore investors, has released an ad. stating that it has already repaid most of it, and that only Rs 2,620 crores are outstanding. This has been paid to SEBI, alongwith another Rs 2,500 crores as a buffer. To verify the accuracy of this statement, Securities and Exchange Board of India (SEBI) would need to weed through the applications of the 3 crore applicants, many with hypothetical addresses, a mammoth task.

The October IIP (index of industrial production) showed a surprisingly unbelievable jump of 8.2% which everyone, not only those with high blood pressure, needs to take with just a pinch of salt. No less than Raghuram Rajan, the PM's Economic Advisor, says so. Let's see if RBI Governor believes this number and lowers interest rates on the presumption that the green shoots of economic growth have just manifested themselves and need to be watered with a rate cut. It is doubtful.

Last week the BSE-Sensex fell 93 points to end at 19,317 and the NSE-Nifty dropped 30 to close at 5,879.

As stated, the efforts of the UPA would be to avoid a downgrade of the country rating and to retain the interest of global investors, by showing it is on the path of economic reforms. If it succeeds in horse trading its way to getting support for reforms which any politician having India's welfare at heart would nonetheless support, then the rally would continue. The rally would be needed to get the remaining disinvestment sales through, in any case.

So one could expect the rally to continue at least till around 20,500-21,000 on the sensex. Unless, of course, politicians run out of ideas and walk out of Parliament.

J Mulraj is a stock market columnist and observer of long standing. His weekly column on stock markets has run for over 27 years. An MBA from IIM Calcutta, he has been a member of the BSE. He is Conference Head - India, for Euromoney. A keen observer of events and trends, he writes in a lucid yet readable style and takes up issues on behalf of the individual investor. Nothing pleases him more than a reader who confesses having no interest in stock markets yet being a reader of his columns. His other interests include reading, both fiction and non-fiction, bridge, snooker and chess.

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